SEN. MITCH MCCONNELL, R-KY., SENATE MINORITY LEADER: The administration negotiated in good faith with the Democratic majority a proposal that was simply unacceptable to the vast majority of our side because we thought it, frankly, wouldn't work.

SEN. CHRIS DODD, D-CONN.: I'm very confident as I stand before you this afternoon that the White House will not allow this industry to collapse or go into an unplanned bankruptcy.

(END VIDEO CLIP)

BRET BAIER, GUEST HOST: Well, the auto bailout legislation died in the Senate last night. The market today was actually up. One reason, the White House indicated it will step in, the treasury department as well.

Dana Perino, White House press secretary issuing this statement to reporters: "Given the current weakened state of the U.S. economy, we will consider other options, if necessary, including the use of the TARP program to prevent a collapse of troubled automakers."

The TARP, as you remember, is the troubled asset relief program, the $700 billion bailout Congress passed in October.

So, Fred, the White House says the bailout legislation didn't work in the Senate. They're going to step in somehow. We don't know when. What do you think?

FRED BARNES, EXECUTIVE EDITOR, THE WEEKLY STANDARD: Well, it shows you who is in charge here of the bailout at the moment, and that's the United Auto Workers.

You would think that somehow the UAW has a seat in the Senate, because it came down to the whole working out of a compromise in the Senate between Republicans and Democrats on some package to bailout the auto industry and turn them into a viable profitable industry at some point.

It was only wage concessions by the UAW that stopped that compromise from coming together. So all the Democrats had to be against it because the UAW refused that one thing?

I think they should have gone ahead and voted, but since they didn't, the UAW basically called the Republicans' bluff and the White House's bluff, and the White House is going to deliver to get them through into January, where they will get through with a more Democratic Senate and a Democratic president, they'll get a better deal by the UAW's standards, from Congress and the president than they will now.

And it will mean that we will have a bailout that will lead to another bailout, and another bailout, and another bailout.

MORT KONDRACKE, EXECUTIVE EDITOR, ROLL CALL: Well, he said that the agreement that the Republicans were advancing, or Senator Corker's from Tennessee, would put the whole load of saving the auto companies on the unions.

That is flatly not so, as Jim Angle's piece described. I mean, the creditors would also take a big hit under that agreement. So it is just flatly false. But Fred is right. The Democrats are all marching to the tune of the UAW. And, apparently, the administration is, too, because they know what the effect of this is going to be. I don't know what kind of conditions they're going to apply, but I can't believe that they're going to give this money on the condition that the UAW take a big cut.

They could have done that in the negotiations with the Democrats. Instead, they had basically vague instructions for an auto czar without deadlines, without demands.

So what he President Bush, I guess, is afraid of is that not only will we have gone into a deep recession on his watch, but we might face total collapse, and he just wants to pass it on, pass the problem on to Barack Obama.

BAIER: Charles, the White House has long said, this president has long said that they were not going to dip into the $700 billion rescue package for this very purpose, for automakers. But now they're indicating that they will.

CHARLES KRAUTHAMMER, SYNDICATED COLUMNIST: And that's why it's a huge concession. The administration understood that it destroyed all lines about government intervention, all the things that conservatives in principle stand against, by the interventions in the market. But it tried at least to hold the line by saying that this is only for the financial institutions, only the banks. Why? Because a bank is special, because it provides a necessity, credit, without which all other industries collapse. So you make an exception.

But once you breach that, and once you allow the use of these funds for an industry, meaning the auto industry, then there are no rules. Then every industry will claim we are important, we have a lot of workers, our collapse will have a bad effect. And that's why there was such resistance on the part of the administration.

It had won, in fact, a battle earlier in which it said if the auto companies want the bailout, it has to come out of previously appropriated money, which was out of the Energy Department, which, ostensibly, would help or produce green cars—not exactly in demand today. And that had been worked out. But in the end it had to reverse course because, as Fred said, the UAW played a high wire act last night. It risked its own collapse with the industry if the administration had not acted. But I think it counted on, and it was right in counting on, the essential goodness of the president, in the sense that he wouldn't allow a collapse. And he also has a sense of obligation to his successor. He won't deliver him a dead auto industry.

BAIER: Fred, how does it play out?

BARNES: How does what play out, the bailout idea?

BAIER: yes.

BARNES: The public is against a bailout. And I think the public would be satisfied with one that actually did create or demand a viable, profitable auto industry in the big three, but we're probably not going to get that.

BAIER: Quickly.

KONDRACKE: The first of many bailouts.

BAIER: Last word on this one.

The Obama team's reaction to the Illinois governor's scandal is raising questions about its promise of transparency. The panel weighs in on that after the break.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

PRESIDENT-ELECT BARACK OBAMA: What I want to do is to gather all the facts about any staff contacts that may have taken place between the transition office and the governor's office, and we'll have those in the next few days, and we'll present them.

But what I'm absolutely certain about is that our office had no involvement in any deal-making around my Senate seat.

(END VIDEO CLIP)

BAIER: There is the president-elect talking about the investigation as it goes on, about what his staff said to Illinois Governor Rod Blagojevich and his staff about the Senate seat.

Mr. Obama's incoming chief of staff, Rahm Emanuel, still refuses to confirm or deny whether he talked to Blagojevich or his office. In fact, yesterday he shoved a reporter's digital recorder away after barking "I'm not going to say a word to you."

So what about this and the issue of transparency here — Mort?

KONDRACKE: What is really interesting, and I want Fred to take note of this, is that the biased media, the liberal media, have not been acting like pussycats in this case. I mean, they have been asking hard questions about who knew what and when did they know it, and approaching Rahm Emanuel on the street and demanding did he know-

Doyle McManus of The Los Angeles Times said "We need to know now whether Obama rules apply here as stated by the high-minded rules of transparency and all that, or Chicago rules."

And the focus of this is Rahm Emanuel, who was, after all, the successor to Rod Blagojevich and his political ally. Rahm took Blagojevich's House seat.

BAIER: Yes, but no one believes he's a target.

KONDRACKE: No, but he's the presumptive contact between the Obama campaign and Blagojevich.

And the thing is, they talk the same kind of language. They talk street language, you know, of the kind that you saw.

That doesn't mean that Rahm is — Rahm is very smart, and I'm sure that he would not be making a money deal for this. But when he is talking to Blagojevich, if there was a tape rolling, it would be expletives deleted in a lot of places by both parties. And that may be embarrassing.

BARNES: In response to Mort's defense of the mainstream media, I would remind him that a stopped clock is right twice a day.

I don't know what Rahm said or what he knew or what role he played, but, clearly, the Obama camp — you can't call it the campaign—the Obama transition team is following one of these rules of handling a scandal, and that is you never talk about any facts because then you just feed the frenzy.

Because then all the reporters will run off and try to find somebody who agrees with that or disagrees with it and where it leads and so on. So you just don't say anything, or you're vague. But that can only hold you for so long.

So I'm looking for this report that Obama has now promised that will say what all his aides did or didn't do.

But the notion — one of Obama's big mistakes was to promise transparency. That was never going to happen.

BAIER: Charles?

KRAUTHAMMER: In response to Mort congratulating the media on their inquiries here, I would point out only that all this inquisitive about Obama is occurring after he was elected.

And before he was elected there was a lack of inquisitiveness about his connections about Rezko and these other miscreants who are now involved in this new scandal.

Look, it's clear from the statements of governor klepto himself on the tape that the Obama people refused a deal, and he had choice words for Obama, saying all that was offered was appreciation.

BAIER: A lot of bleeps.

KRAUTHAMMER: So, in the end, no deal. But in the question is if there were negotiations or talks on tape, what might have happened in the interim?

For example, the governor says I'll give you who you want if I'm made Secretary of Energy. The answer from the Obama emissary could be, "Are you out of your mind? It's corrupt, I'm going to call the cops." Or it could be "That would look bad. We'll consider it and let you know." I mean, all of this is possible.

And he might have thought in his mind it's corrupt and it's bad, but he didn't want to cause a scene or scandal and offend him. So the way it's going to sound on the tape, even though in the end is uncorrupt, could be extremely damaging.

Copy: Content and Programming Copyright 2008 FOX News Network, LLC. ALL RIGHTS RESERVED. Transcription Copyright 2008 ASC LLC (www.ascllc.net), which takes sole responsibility for the accuracy of the transcription. ALL RIGHTS RESERVED. No license is granted to the user of this material except for the user's personal or internal use and, in such case, only one copy may be printed, nor shall user use any material for commercial purposes or in any fashion that may infringe upon Fox News Network, LLC'S and ASC LLC's copyrights or other proprietary rights or interests in the material. This is not a legal transcript for purposes of litigation.